NOTE: This post was graciously included in the 3rd Anniversary of the Carnival of Personal Finance #157 as an EDITOR’S CHOICE at Consumerism Commentary. Many thanks to Flexo for hosting. Be sure and subscribe to Consumerism Commentary via RSS or email.
I’ve written some posts in the past few months about 7 bad decisions I made that cost me over $1,000 and on the 12 things I learned by 42 that I wish I’d known at 22. I’ve exposed my worst decision ever as well as many things I didn’t learn in college.
I decided to examine what were the underlying causes of my top 5 personal finance blunders and I came up with these:
I misused credit cards
I got my first credit card when I was 18. I didn’t know anything about credit and no one had ever explained how it worked. I got a store credit card and dutifully paid it off the next month. Later, I used it to buy Christmas presents and went overboard with it. I couldn’t pay it all off at once, so I made payments. It became a downward spiral as I would finally pay off the card and then charge it right back up.
I wasn’t able to conceive of something as complicated as credit card arbitrage. I was simply using credit to get the “things” I wanted without having to pay for them, or even be able to pay for them.
Later, I found myself tens of thousands of dollars in debt, consumer debt…and with virtually nothing to show for it. THAT’S the biggest blunder you can make with credit cards.
I failed to start early
There’s always time, that was my motto. I never thought I would be playing catch up. I was going to be a rich multi-millionaire before I was 30!
The fact is, it’s never too late to start saving money, but it’s also NEVER too early! My problem was that it was so difficult. The reason it was so difficult was because I had failed to learn to discipline myself to do it anyway.
I depended on borrowed money
I depended on borrowed money to finance my education. I depended on borrowed money to buy a home. I depended on money to finance my vehicles. I depended on borrowed money (via credit cards) to buy almost everything I wanted or needed. Borrowed money must be paid back and it wasn’t long before my entire paycheck became just one big debt payment.
When everything you make has to be used to make debt payments, you cannot build wealth. It just ain’t gonna happen.
I chased hot investments
I fell into the tech bubble in 1999 and my timing couldn’t have been worse. Just as the market peaked, I began investing in a technology fund. After about 6 months of dollar cost averaging into a sinking ship, my losses were horrible. I bailed out in 2000 and avoided investing in anything for quite some time.
When I did get back into the market, I chased returns from mutual funds, stocks that were rising, and finally settled on some diversified index funds. I still have a little money that I play with, but most of my portfolio is in safe places rather than the latest and greatest thing.
I lived paycheck to paycheck and spending every last dime I made
I’ve already mentioned some aspects of this, but when you spend every last dime you make on eating out, payments, gifts, dumb mistakes, junk food, clothes, and stuff that won’t matter in 5 days, you cannot, you WILL NOT get ahead.
Living paycheck to paycheck isn’t fun. It isn’t satisfying. It isn’t enjoyable. It isn’t how I thought I would live my life when I was growing up.
What to do
It’s never too late to change. No matter what you’ve done, no matter where you are financially, no matter how much debt you’re in, no matter what, make the decision to do whatever it takes to change your current course.
Ignite the fire inside of yourself and make the decision to change where you’re headed. You can do it. I know. I did.
[tags]credit, debt, finance, paycheck[/tags]